Thursday, June 21, 2007

Pimping the Bottom Billion

The development expert Paul Collier has written an interesting new book called The Bottom Billion. Collier is a former director of development research at the World Bank and now directs the centre for the study of African Economies at Oxford University, and despite this rather technocratic background, he has written a surprisingly accessible book.

"For forty years the development challenge has been a rich world of one billion people facing a poor world of five billion people,” he writes. Now, he adds, most of those five billion, about 80 percent, live in countries that are indeed developing, often amazingly fast. His book is about the last 20 percent: the bottom billion, most of whom live in Africa. Since the terrorist attacks in New York in September 2001, many people are waking up to the fact that the plight of these people is not just a question of morality or guilt. “A cesspool of misery next to a world of growing prosperity is both terrible for those in the cesspool and dangerous for those who live next to it,” Collier says. TJN, like many other groups of people from many different parts of the political spectrum, agree.

Collier reaches some surpising conclusions. For example, he is sceptical about what foreign aid can achieve: it can help, he writes, but is subject to diminishing returns and suffers from problems associated with mineral resources: it can exacerbate “Dutch Disease” effects and it undermines the healthy relationships of taxation where rulers tax citizens, and citizens demand accountability in return. Some years earlier, Collier and his partners Anke Hoeffler and Cathy Patillo had studied capital flight out of poor countries, resulting in a widely-quoted 1999 paper which estimated, among other things, that by 1866, Ugandans held two thirds of their private wealth abroad; by 1990, 39% of Africa's private wealth was held abroad, and the end of military rule in 1998, Nigerians were holding around $100 billion of capital overseas. "Africa has by far the lowest capital per worker, which makes massive capital flight from Africa all the more distinctive," he said. "Despite being chronically short of private capital, the Bottom Billion are integrating into the global economy through capital flight rather than capital inflows. .. Don't count on global capital mobility to develop the bottom billion, capital-scarce as they are. It is more likely to reinforce the traps."

Collier also writes about something else close to TJN’s core concerns.

The societies of the bottom billion might become safe haven for criminals, terrorists and disease. Paradoxically, sone of this is reciprocal: the rich countries have been a safe haven for the criminals of the bottom billion. One grotesque form of this safe haven role has been that western banks have taken deposits looted from the bottom-billion societies, held the money in great secrecy, and refused to give it back. . . The banking profession has a responsibility to clean up its act, just as de Beers did in respect to diamonds. At present, a small minority of bankers are living on the profits from holding deposits of corrupt money. We have a word for people who live on the immoral earnings of others: pimps. Pimping bankers are no better than any other sort of pimp. They have to be driven out of banking.

Collier’s recipes for cleaning up are not especially sophisticated, but the general thrust is dead right. (Perhaps his notion of "pimping bankers" could be combined with John Christensen's notion of a "pinstripe infrastructure" of corruption-enablers to create a new term: pinstripe pimps.) Now that mainstream development theorists like Collier have spotted the problem – and it is staggering that the development community (whatever that means) only appears to be waking up now to this gargantuan issue (which, as it happens, goes far beyond the pimping bankers he criticises) this will add new tailwinds to TJN’s campaigns. Step by step, the world is waking up to the scandal of offshore.


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